Panic in China: Five key questions for investors and regulators

A Filipino trader stands in front of the electronic board showing a downward trend on the Philippines and most Asian markets during morning trading at the Philippine Stock Exchange in Makati, south of Manila, Philippines on Thursday, Jan. 7, 2016. Chinese stocks nosedived on Thursday, triggering the second daylong trading halt of the week and sending other Asian markets sharply lower as investor jitters rippled across the region. (AP Photo/Aaron Favila)

Here we look at what is behind the latest stock market sell-off and what it means:

:: What is behind the panic?

China’s rapid growth has slowed, leading Beijing to devaluations of the yuan since last summer to try to help exporters. But the regime has been unable to stem heavy declines in the Shanghai stock market and some say attempts to intervene have backfired by lifting anxiety.

Regulators recently installed automatic circuit breakers to close the exchange once market declines exceed 7% in a bid to stem volatility. The regime said this measure would only be used rarely, but it has happened twice this week, each time leading to a wave of selling across the globe.

Trading woes have been compounded as Chinese regulators are also gradually withdrawing a six-month ban on large share sales, introduced last summer to calm volatile markets.

Traders fear the share sale ban may have only delayed the sell-off.

:: Why are markets so concerned?

Some say it is because, unlike in previous bouts of economic weakness, central banks now lack the firepower to step in and stop the rot. This is a worry because ultra-low interest rates and money-printing underpin recoveries in Europe, the US and the UK.

:: What does it mean for people in Britain?

Today’s rout has so far seen £46 billion wiped off the value of the UK’s top 100 listed companies. This affects millions of people who have money tied up in pension funds as well as those with other stock investments.

Petrol prices could be cheaper, as oil has also slumped to fresh 11-year lows - adding to downward pressure on inflation, already near zero. This could push back the timing of an interest rate hike, currently expected towards the end of this year, or even into 2017. That is good for borrowers, but bad for savers.